Katariya Textiles Surat, Ahmednagar V. DCIT, A'Nagar Cir., Ahmednagar

ITA 959/PUN/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 66900 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 23-10-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 18-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Assessee Lawyers: P S SHINGTE
• Keywords: Corroborative evidences
• Section: 143(3); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES A, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 959/PN/2011 (ASSESSMENT YEAR : 2007-08) KATARIYA TEXTILES (SURAT) C/O M/S SHANTILAL GANDHI TAX CONSULTANT, 146, 1 ST FLOOR AMBER PLAZA, ST. RD. NAGAR. PAN : AACFK 7340 K . APPELLANT VS. DY. COMMISSIONER OF INCOME TAX AHMEDNAGAR CIRCLE, AHMEDNAGAR . RESPONDENT APPELLANT BY : MR. P.S. SHINGTE RESPONDENT BY : MS. ANN KAPTHUAMA DATE OF HEARING : 03-04-2013 DATE OF PRONOUNCEMENT : 29-04-2013 ORDER PER G. S. PANNU, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, PUNE DATED 31.01.2011 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 22.12.2009 PAS SED BY THE ASSESSING OFFICER, UNDER SECTION 143(3) OF THE INCOME TAX ACT , 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2007-08. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED TWO GROU NDS OF APPEAL WHICH WE SHALL DEAL IN SERIATIM. THE FIRST GROUND RELATES TO AN ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ESTIMATION OF GROSS PROFIT (GP). THE ASSESSING OFFICER MADE AN ADDITION OF RS. 18,37,349 /-, WHICH HAS BEEN RETAINED BY THE CIT(A) AT RS. 6,27,127/-. NOT BEING SATISFIED WITH THE PART RELIEF ALLOWED BY THE CIT(A), ASSESSEE IS IN FURTHER APPEA L BEFORE US. ITA NO. 959/PN/2011 KATARIYA TEXTILES (SURAT) A.Y. 2007-08 3. IN BRIEF, THE RELEVANT FACTS ARE THAT ASSESSEE I S A PARTNERSHIP FIRM, WHICH IS ENGAGED IN TRADING OF SAREES. THE BUSINESS OF TH E ASSESSEE CAN BE UNDERSTOOD AS FOLLOWS. THE ASSESSEE PROCURES ORDERS FROM VARIOUS RETAILERS/WHOLESALERS AND FORWARDS THE SAME TO THE MANUFACTURERS. IT PROCURES THE GOODS FROM THE MANUFACTURERS ACCORDINGLY AND TH E DELIVERY/DISPATCH IS MADE DIRECTLY TO THE BUYERS, RETAILERS/WHOLESALERS, AND ACCORDINGLY THE ASSESSEE DOES NOT KEEP ANY STOCK IN ITS PREMISES. T HE ASSESSEE FURTHER EXPLAINED BEFORE THE ASSESSING OFFICER THAT ITS BUS INESS IS OF ADAT TYPE AND MARGINS ARE IN THE RANGE OF 1.25% TO 1.5%. THE ASSE SSEE WAS FOUND TO HAVE SHOWN SALES OF RS. 12,10,22,015/- AND PURCHASES OF RS. 11,88,70,097/- AND A GP OF RS. 17,93,311/- I.E. 1.48%. THE ASSESSING OFF ICER NOTED THAT THE GP RATE DECLARED BY THE ASSESSEE WAS TOO LOW AND REQUI RED THE ASSESSEE TO JUSTIFY THE SAME. IN RESPONSE, ASSESSEE POINTED OUT THAT IN THE PAST TWO YEARS ALSO THE GP RATE WAS COMPARABLE AND THAT IT WAS IND EED OPERATING LIKE A COMMISSION AGENT OR A ADATIYA AND IN SUCH LINE OF BUSINESS THE PROFIT MARGIN RANGING BETWEEN 1% TO 1.5% WAS ACCEPTABLE. THE ASSE SSEE ALSO FURNISHED AN ILLUSTRATIVE CHART ALONG WITH PURCHASE BILLS OF THE MANUFACTURERS FROM WHOM SAREES WERE PURCHASED AND CORRESPONDING BILLS FOR S ALES MADE TO RETAILERS/WHOLESALERS. THE ASSESSING OFFICER, HOWEV ER, HELD THAT THE ASSESSEE HAD MANIPULATED SALES PRICES TO SUPPRESS THE GP BEC AUSE IN SOME TRANSACTIONS IT HAD INCURRED LOSS WHEREAS IN SOME T RANSACTIONS GP WAS APPROXIMATELY 3% ALSO. HE, THEREFORE, REJECTED THE BOOK RESULTS DECLARED BY THE ASSESSEE BY INVOKING SECTION 145(3) OF THE ACT. THE ASSESSING OFFICER ESTIMATED THE GP AT 3% AS AGAINST 1.8% DECLARED BY THE ASSESSEE AND THE DIFFERENCE OF 1.52% WAS APPLIED TO THE DECLARED SAL ES OF THE ASSESSEE AND THE RESULTANT FIGURE OF RS. 18,37,349/- WAS ADDED TO TH E TOTAL INCOME AS THE ESTIMATED ADDITIONAL INCOME OF THE ASSESSEE FROM TH E BUSINESS OF SAREES. 4. IN APPEAL BEFORE THE CIT(A), ASSESSEE MADE VARIO US FACTUAL AS WELL AS LEGAL SUBMISSIONS. THE CIT(A) UPHELD THE STAND OF T HE ASSESSING OFFICER OF REJECTING THE BOOK RESULTS DECLARED BY THE ASSESSEE SO, HOWEVER, HE SCALED ITA NO. 959/PN/2011 KATARIYA TEXTILES (SURAT) A.Y. 2007-08 DOWN THE ESTIMATED GP TO 2% AS AGAINST 3% TAKEN BY THE ASSESSING OFFICER AND ACCORDINGLY ALLOWED PARTIAL RELIEF. NOT BEING S ATISFIED WITH THE AFORESAID RELIEF, ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. LEARNED COUNSEL FOR THE ASSESSEE HAS POINTED OUT THAT THE INCOME TAX AUTHORITIES HAVE WRONGLY INVOKED SECTION 145(3) OF THE ACT INASMUCH AS THE ASSESSEE HAS CARRIED OUT ITS BUSINESS IN SIMILAR M ANNER IN THE PAST AND AS ALSO IN THE SUBSEQUENT YEARS WHEREIN NO SUCH ADDITI ONS HAVE BEEN MADE. IT WAS POINTED OUT THAT THOUGH IN ASSESSMENT YEAR 2004 -05, GP DECLARED AS PER THE BOOKS OF ACCOUNT WAS REJECTED BY THE ASSESSING OFFICER AND THE INCOME WAS ESTIMATED, HOWEVER THE CIT(A) VIDE ITS ORDER DA TED 08.08.2007 DELETED SUCH AN ADDITION AND THE REVENUE DID NOT TAKE UP TH E MATTER FURTHER IN APPEAL. SIMILARLY FOR THE ASSESSMENT YEAR 2006-07, IT WAS P OINTED OUT THAT THE ASSESSMENT WAS FINALIZED UNDER SECTION 143(3) OF TH E ACT DATED 13.10.2008 AND THE GP DECLARED AS PER THE BOOKS OF ACCOUNT MAI NTAINED WAS ACCEPTED. IT IS FURTHER POINTED OUT THAT THE REASONS ADVANCED BY THE ASSESSING OFFICER IN THIS YEAR FOR REJECTING THE BOOK RESULTS ARE UNTENA BLE AND IN THIS REGARD THE DETAILED SUBMISSIONS MADE TO THE CIT(A), WHICH HAVE BEEN REPRODUCED BY THE CIT(A) IN HIS ORDER IN PARA 3.2, HAVE BEEN REITERAT ED. ACCORDING TO THE LEARNED COUNSEL, THE BOOKS RESULTS HAVE BEEN REJECTED ON ME RE SURMISES AND THAT THERE WERE NO JUSTIFICATION FOR THE CIT(A) TO HAVE ALLOWED ONLY A PARTIAL RELIEF, WHEREAS THE ENTIRE ADDITION SHOULD HAVE BEEN DELETE D. 6. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE APPEARING FOR THE REVENUE HAS POINTED OUT THAT THE ASSESSING OFFICER FOUND THE GP RATE QUITE LOW AND IN SOME CASES IT WAS FOUND THAT THE A SSESSEE HAS SOLD THE GOODS AT A LOSS AND IN ANOTHER CASE THE GP RATE WAS 2.86% WHICH WAS HIGHER THAN THE MARGIN OF 1% TO 1.5% CLAIMED BY THE ASSESS EE. FOR THE SAID REASONS THE ACTION OF THE AUTHORITIES BELOW IN REJECTING TH E BOOK RESULTS IS SOUGHT TO BE DEFENDED. ITA NO. 959/PN/2011 KATARIYA TEXTILES (SURAT) A.Y. 2007-08 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE NATURE OF ASSESSEES BUSINESS IS NOT IN DISPUTE. THE ASSESSEE IS PRIMARILY ENGAGED IN BUYING AND SELLING OF SAREES. AS EXPLAINED BEFORE T HE ASSESSING OFFICER, THE ASSESSEE PURCHASES SAREES FROM THE MANUFACTURERS ON THE BASIS OF THE SAMPLES SHOWN TO VARIOUS RETAILERS/WHOLESALERS. ON RECEIPT OF ORDERS FROM SUCH RETAILERS/WHOLESALERS IT FORWARDS THE SAME TO THE MANUFACTURER, GOODS ARE PURCHASED AND DISPATCHED TO THE ULTIMATE BUYER AND ASSESSEE DOES NOT KEEP ANY STOCK AT ITS PLACE OF BUSINESS. IN FACT, THE FI NANCIAL STATEMENTS OF THE ASSESSEE PLACED IN PAPER BOOK DID NOT REVEAL ANY OP ENING OR CLOSING STOCK OF MATERIALS. THE BOOKS OF ACCOUNT OF THE ASSESSEE HAV E BEEN AUDITED IN TERMS OF SECTION 44AB OF THE ACT. THE ASSESSEES BUSINESS IS STATED TO HAVE BEEN SIMILAR TO THAT IN THE PAST AS WELL AS IN THE SUBSE QUENT ASSESSMENT YEARS. THE BOOK RESULTS DECLARED BY THE ASSESSEE HAVE BEEN REJ ECTED BY THE ASSESSING OFFICER BY INVOKING SECTION 145(3) OF THE ACT. SECT ION 145(3) OF THE ACT, EMPOWERS THE ASSESSING OFFICER TO REJECT THE BOOK R ESULTS ON NOT BEING SATISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE OR WHERE THE METHOD OF ACCOUNTING PROVIDED IN SUB-SECTION (1) OF SECTION 145 OF THE ACT OR THE ACCOUNTING STANDARDS NOTIFIED UNDER SECTION (2) OF SECTION 145 OF THE ACT HAVE NOT BEEN REGULARLY F OLLOWED BY THE ASSESSEE. IN THE PRESENT CASE, BOOK RESULTS HAVE BEEN REJECTED B Y THE ASSESSING OFFICER ON NOT BEING SATISFIED ABOUT THE CORRECTNESS OR COMPLE TENESS OF THE ACCOUNTS OF THE ASSESSEE. HAVING CONSIDERED THE DISCREPANCIES/D EFECTS IN THE ACCOUNTS SOUGHT TO BE MADE OUT BY THE ASSESSING OFFICER, IT IS EVIDENT THAT THE SAME DO NOT SUGGEST ANY INCORRECTNESS OR INCOMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE WITHIN THE MEANING OF SECTION 145(3) OF TH E ACT. FIRSTLY, AS PER THE ASSESSING OFFICER, THE PERCENTAGE OF GP AND NP REPO RTED ARE TOO LOW TO BE ACCEPTED. IN OUR VIEW, THE CHARGE MADE OUT BY THE A SSESSING OFFICER IS TOO BALD AND IS DEVOID OF ANY CREDIBLE SUPPORT. FURTHER IN THE ASSESSMENT ORDER, REFERENCE HAS BEEN MADE TO PURCHASE AND SALE BILLS IN THREE CASES. IN FIRST INSTANCE, THE ASSESSING OFFICER NOTICED THAT IN THE CASE OF GOODS PURCHASED FROM M/S KAKA FABRICS PVT. LTD. AND SOLD TO M/S ARI HANT SAREE CENTRE, THERE IS ITA NO. 959/PN/2011 KATARIYA TEXTILES (SURAT) A.Y. 2007-08 A LOSS WITH THE PURCHASE PRICE OF RS. 11,352/- AND THE SELLING PRICE BEING RS. 11,243/-; SECOND INSTANCE IS THE CASE OF SALE TO M/ S ARIHANT SAREE CENTRE WHERE IT IS NOTICED THAT THE GP WORKS OUT TO 2.6%; IN THE THIRD INSTANCE OF PURCHASE FROM M/S LALPARI SAREES AND SALE TO KHATRI TRADING CO., A DISCREPANCY IS NOTICED TO THE EFFECT THAT THE SALE BILL ISSUED BY THE M/S LALPARI SAREES HAS A OVERWRITING ON THE DATE. FURTHER AS PE R THE ASSESSING OFFICER THE GOODS PURCHASED FROM M/S LALPARI SAREES AT RS. 14,3 45/- HAVE BEEN SOLD TO M/S KHATRI TRADING CO. AT A LOSS I.E. AT A PRICE OF RS. 13,901/-. AS PER THE ASSESSING OFFICER IN THE INSTANT TYPE OF BUSINESS, INCURRENCE OF LOSS IS UNBELIEVABLE. FOR THE AFORESAID REASONS, THE ASSESS ING OFFICER HAS CONCLUDED THAT ASSESSEE MANIPULATED ITS SALE PRICES IN ORDER TO SUPPRESS THE GP. 8. IN OUR CONSIDERED OPINION, THE EXERCISE CARRIED OUT BY THE ASSESSING OFFICER DOES NOT STAND TO REASON AND DOES NOT SUPPO RT HIS INFERENCE THAT THE ASSESSEE HAS MANIPULATED ITS SALE PRICE. QUITE CLEA RLY, IT IS A CASE WHERE THE ASSESSING OFFICER HAS MERELY DISBELIEVED THE MATERI AL PRODUCED BEFORE HIM INSTEAD OF SUBJECTING IT TO ANY INDEPENDENT VERIFIC ATION. APART THEREFROM IN THE CASE OF THE PURCHASE FROM KAKA FABRICS PVT. LTD. TH E ASSESSEE EXPLAINED BEFORE THE CIT(A) THAT THE ASSESSING OFFICER HAD WR ONGLY TAKEN THE PURCHASE PRICE AT RS. 11,351/- WHEREAS ACTUALLY IT WAS RS. 1 1,011/- AND IT WAS ALSO POINTED OUT THAT THE SAID PURCHASE PRICE CORRESPOND ED TO THE PAYMENT MADE BY THE ASSESSEE, WHICH WAS THROUGH AN ACCOUNT PAYEE CHEQUE. EVEN WITH REGARD TO THE TRANSACTIONS WITH M/S ARIHANT SAREE C ENTRE, AHMEDNAGAR, THE ASSESSEE POINTED OUT THAT THE GP OF 2.86% WAS ONE S UCH TRANSACTION WHEREAS IN OTHER TRANSACTIONS, THE GP RATE WAS WITHIN THE M ARGINS EXPLAINED BY THE ASSESSEE. IN CONSIDERED OPINION, THE DISCREPANCIES/ DEFECTS SOUGHT TO BE NOTED BY THE ASSESSING OFFICER TO INVOKE SECTION 145(3) O F THE ACT ARE NOT SOUND AND ARE REQUIRED TO BE IGNORED. IN OUR CONSIDERED OPINI ON, THE ASSESSEE IS JUSTIFIED THE ASCERTAINING THAT HAVING REGARD TO THE FACTS AN D CIRCUMSTANCES OF THE CASE, THE BOOK RESULTS HAVE BEEN REJECTED BY THE ASSESSIN G OFFICER ON MERE SURMISES AND CONJECTURES. THUS, WE SET ASIDE THE OR DER OF THE CIT(A) AND ITA NO. 959/PN/2011 KATARIYA TEXTILES (SURAT) A.Y. 2007-08 DIRECT THE ASSESSING OFFICER TO DELETE THE ENTIRE A DDITION ON ACCOUNT OF ESTIMATION OF GP. THUS, ON THIS GROUND ASSESSEE SUC CEEDS. 9. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH R EGARD TO THE AMOUNT OF RS. 6,36,610/- WHICH HAS BEEN DISALLOWED BY THE ASS ESSING OFFICER WHILE COMPUTING CAPITAL GAIN ON SALE OF LAND. THE ASSESSE E HAD DECLARED LONG TERM CAPITAL GAIN OF RS. 29,39,197/- ON ACCOUNT OF SALE OF PLOT AT AHMEDNAGAR. IN THE DETAILS OF COMPUTATION OF CAPITAL GAIN, THE ASS ESSING OFFICER NOTED THAT ASSESSEE HAD CLAIMED RS. 6,36,610/- AS COST OF IMPR OVEMENT. THE ASSESSING OFFICER ISSUED A SHOW-CAUSE NOTICE IN ORDER TO VERI FY AS TO WHETHER THE COST OF IMPROVEMENT CLAIMED BY THE ASSESSEE HAS BEEN ACTUAL LY INCURRED OR NOT. THE ASSESSEE SUBMITTED BILLS ISSUED BY THE CONTRACTOR M /S GAGANDEEP CONSTRUCTION (PROPRIETOR SHRI VINAYAK K. INGALGI) D ATED 10.08.2006 AND 12.05.2008 AMOUNTING TO RS. 3,13,670/- AND RS. 3,02 ,940/- RESPECTIVELY. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO PRODUCE THE CONTRACTOR, WHO APPEARED BEFORE THE ASSESSING OFFICER AND WAS EXAMI NED. IT WAS EXPLAINED THAT THE EXPENSES WERE INCURRED ON MURUM-FILLING, A ND ERECTION OF THE COMPOUND WALL ON THE SAID PIECE OF LAND. THE ASSESS ING OFFICER HAS NOTICED THAT THOUGH THE CONTRACTOR APPEARED BEFORE HIM AND ADMITTED THE EXECUTION OF WORK, BUT COULD NOT PRODUCE THE SUPPORTING EVIDENCE IN RESPECT OF MATERIALS PURCHASED OR LABOUR PAYMENTS. THE ASSESSING OFFICER ACCORDINGLY HELD THAT THE ASSESSEE HAS FAILED TO ESTABLISH THE INCURRENCE OF EXPENDITURE OF RS. 6,36,610/- CLAIMED AS COST OF IMPROVEMENT AND A CCORDINGLY DISALLOWED THE SAME. 10. IN APPEAL BEFORE THE CIT(A), ASSESSEE EXPLAINED THAT THE CONTRACTOR WAS AN INCOME-TAX PAYEE WHO HAD FURNISHED HIS INCOM E-TAX PARTICULARS BEFORE THE ASSESSING OFFICER; THAT THE PAYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUES; AND, APPLICABLE TAX HAS ALSO BEEN DEDUCTED AT SOURCE. BEFORE THE CIT(A) ASSESSEE ALSO FURNISHED THE COPY OF THE ACKN OWLEDGEMENT OF THE RETURN OF INCOME FILED BY THE CONTRACTOR FOR ASSESSMENT YE AR 2007-08 AND A COPY OF ITA NO. 959/PN/2011 KATARIYA TEXTILES (SURAT) A.Y. 2007-08 ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2009-10 WA S ALSO FURNISHED TO SUPPORT THE PLEA THAT THE WORK WAS ACTUALLY CARRIED OUT BY THE CONTRACTOR. IT WAS ALSO EXPLAINED THAT THE FAILURE OF THE CONTRACTOR T O PRODUCE THE RELEVANT BILLS FOR PURCHASE OF MATERIALS, ETC. WAS NOT FATAL FOR THE R EASON THAT MOST OF THE SUPPLIES WERE PURCHASED IN CASH BY THE CONTRACTOR. THE CIT(A) HOWEVER HAS NOT ACCEPTED THE PLEA OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE DID NOT PRODUCE THE COPY OF HIS BANK ACCOUNT IN WHICH THE P AYMENTS MADE TO THE CONTRACTOR HAVE BEEN DEBITED. FOR THE AFORESAID REA SON, THE ADDITION MADE BY THE ASSESSING OFFICER HAS BEEN UPHELD BY THE CIT(A) . 11. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS VEHEMENTLY POINTED OUT THAT THE PAYMENTS FOR THE EXPENDITURE W AS MADE TO THE CONTRACTOR BY ACCOUNT PAYEE CHEQUES AND THE REQUISITE TDS WAS ALSO DEDUCTED AT SOURCE. THE CONTRACTOR WAS A REGULAR INCOME-TAX PAY EE ENGAGED IN UNDERTAKING GOVERNMENT CONTRACTS AND HAD CARRIED OU T THE WORK OF MURUM- FILLING AND CONSTRUCTION OF COMPOUND WALL OF THE PL OT, AND SUCH WORK COULD HAVE BEEN EASILY VERIFIED. IT IS POINTED OUT THAT THE CL AIM HAS BEEN DISALLOWED BY THE LOWER AUTHORITIES FOR SOME OR OTHER REASONS WHICH W AS NOT PROPER. WITH REGARD TO THE BANK STATEMENT OF THE ASSESSEE SHOWING PAYME NTS TO THE CONTRACTOR, IT WAS POINTED OUT THAT A COPY OF THE SAME HAS BEEN PL ACED IN THE PAPER BOOK AT PAGE 42 WHICH SHOWS THAT REQUISITE PAYMENTS WERE MA DE. IT IS, THEREFORE, CONTENDED THAT THE IMPUGNED ADDITION HAS BEEN WRONG LY MADE BY THE LOWER AUTHORITIES. ON THE OTHER HAND, THE LEARNED DEPARTM ENTAL REPRESENTATIVE APPEARING FOR THE REVENUE HAS CONTENDED THAT BOTH T HE LOWER AUTHORITIES HAVE NOTICED THAT ASSESSEE WAS UNABLE TO ESTABLISH THE I NCURRENCE OF IMPUGNED EXPENDITURE AND EVEN BEFORE THE TRIBUNAL, SUFFICIEN T EVIDENCE HAS NOT BEEN LEAD IN THAT REGARD. 12. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. IT IS QUITE EVIDENT THAT ASSESSEE CLAIMED THAT THE COST OF IMPROVEMENT WAS ON ACCOUNT OF MURUM-FILLING, AND ERECTION OF THE COMPOUND WALL OF THE PLOT OF LAND. THE ITA NO. 959/PN/2011 KATARIYA TEXTILES (SURAT) A.Y. 2007-08 PAYMENT FOR THE EXPENDITURE WAS MADE TO A CONTRACTO R, WHO APPEARED BEFORE THE ASSESSING OFFICER AND CONFIRMED CARRYING OUT TH E WORK AND RECEIVING PAYMENT OF RS. 6,36,610/- FROM THE ASSESSEE. THE AS SESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION BECAUSE THE CONTRACT OR COULD NOT PRODUCE THE SUPPORTING BILLS FOR THE EXPENSES INCURRED IN EXECU TING WORK FOR THE ASSESSEE. BEFORE THE CIT(A), ASSESSEE EXPLAINED THAT THE CONT RACTOR COULD NOT PRODUCE THE COPY OF BANK STATEMENT, ACKNOWLEDGEMENT OF RETU RN OF INCOME FOR ASSESSMENT YEARS 2007-08 AND 2009-10 BEFORE THE ASS ESSING OFFICER, AS HIS CONSULTANT WAS OUT OF STATION. HOWEVER, BY THE TIM E THE NECESSARY INFORMATION WAS GATHERED BY THE CONTRACTOR, THE ASSESSMENT WAS COMPLETED BY THE ASSESSING OFFICER. NEVERTHELESS, THE ASSESSEE FURNI SHED THE AFORESAID INFORMATION WITH THE CIT(A). IN OUR CONSIDERED OPIN ION, THE MATERIAL PUTFORTH BY THE ASSESSEE BEFORE THE ASSESSING OFFICER OR EVEN B EFORE THE CIT(A) HAS NOT BEEN FOUND TO BE FALSE OR BOGUS. WHILE THE CIT(A) I S CORRECT IN OBSERVING THAT MERELY BECAUSE THE PAYMENT HAS BEEN MADE BY CHEQUE OR THAT THE CONTRACTOR IS ASSESSED TO TAX, THE CLAIM OF EXPENDITURE CANNOT BE TREATED AS GENUINE; SO HOWEVER, IT IS ALSO EMERGING THAT THE CONTRACTOR AP PEARED BEFORE THE ASSESSING OFFICER AND EXPLAINED THE NATURE OF WORK CARRIED OUT, TO WHICH THERE IS NO NEGATION. CONSIDERING THE ENTIRETY OF CIRCUMS TANCES, IN OUR VIEW, THE LOWER AUTHORITIES HAVE ERRED IN DISALLOWING THE AFO RESAID CLAIM OF THE ASSESSEE WHILE COMPUTING CAPITAL GAINS ON SALE OF PLOT. ACCO RDINGLY, THE ORDER OF THE CIT(A) ON THIS ASPECT IS SET ASIDE AND THE ASSESSIN G OFFICER IS DIRECTED TO RE- COMPUTE THE CAPITAL GAIN ON SALE OF PLOT, AHMEDNAGA R BY CONSIDERING COST OF IMPROVEMENT OF RS. 6,36,610/- CLAIMED BY THE ASSESS EE AS PER THE LAW. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH APRIL, 2013. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER ITA NO. 959/PN/2011 KATARIYA TEXTILES (SURAT) A.Y. 2007-08 PUNE, DATED: 29 TH APRIL, 2013 SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-I, PUNE; 4) THE CIT, PUNE; 5) THE DR, A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// PRIVATE SECRETARY I.T.A.T., PUNE